The CBO estimates the cost of the Fannie-Freddie backstop: Only $25 billion, but …

The Congressional Budget Office has just issued its estimate of the likely cost of Hank Paulson’s plan to let troubled mortgage giants Fannie Mae and Freddie Mac draw on a Treasury credit line (that is, borrow money from taxpayers). The verdict: $25 billion.

This is what the CBO calls “probability-weighted average” of the different potential outcomes. Its economists estimate that there’s more than a 50% chance that Fannie and Freddie will be fine and won’t need a cent, and almost a 5% chance that losses would total more than $100 billion. It should be added that don’t really know that this is the probability distribution. Rating agencies and others thinking they knew the probability of mortgage defaults when they didn’t are a large part of what got us into this problem. But you’ve got to make some sort of estimate or you’re completely groping in the dark.

Finally, CBO director Peter Orszag notes that:

a strong argument can be made that if the Treasury used the proposed authority, the GSEs’ operations should be incorporated directly into the federal budget.

Fannie’s and Freddie’s “book of business”–that is, their assets plus the mortgage securities they’ve guaranteed–adds up to about $5.2 trillion. The U.S. government’s current external debt is $5.3 trillion. Incorporate the GSEs into the budget, and you double of the debt.

Except that it’s not quite the same kind of debt. The Fanniefreddieplex’s $5.2 trillion is backed by lots of valuable collateral; the government’s $5.3 billion is a direct claim on future tax revenue (I mean, I guess we could sell the Capitol or Fort Knox to raise money, too, but that’s not really the plan). That mortgage collateral may be worth slightly less than $5.2 trillion at the moment. But it’s never going to zero, or anywhere near.